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Citi reiterated a Sell rating on XPeng (NYSE:XPEV) after the company announced that the electric vehicle maker would be cutting the MSRP on its models. The price cut scale for G3i is at RMB20K-25K while the P5 is cut by RMB23K and the P7 by RMB30K-36K. These cuts follow similar cuts by Tesla (NASDAQ:TSLA) and Huawei AITO.
Analysts at Citi believe that Tesla’s price cut is different from those of AITO and XPeng, as Tesla mainly transformed its operating leverage effect to lower ASP for market share gain while AITO and XPeng were forced to cut MSRPs to maintain sales volume even with negative bottom lines. Also, the price cuts for Tesla and XPeng will make it more difficult for XPeng to set pricing for its facelifted P7 and upcoming G7.
They wrote in a note, “We believe the company’s model-cycle face serious challenges in 2023 and beyond, as foreshadowed by its recent market-share loss on poor sales and order in-takes. To avert further sales declines, we expect Xpeng to commit to even higher R&D spending going forward, further pressuring margins. Our 2022E/23E revenue forecasts are significantly below consensus, and we do not expect breakeven at the NP level until at least 2026E, at a 1.2% ROIC.”
Shares of XPEV are up 0.53% in pre-market trading on Wednesday.
